Durables dilemma: Weak rupee, flat demand

Companies are caught between falling demand and a weakening rupee against the dollar that makes imports costlier

The fall of the rupee to below 63 a dollar on Monday is expected to push up prices of consumer durables and electronic products by three to five per cent. The price rise, which would be the third for quite a few companies, coincides with the festive season, which kicks off with Onam next week.

Companies struggling with a volatile rupee claim they have no choice. From May to now, the rupee has depreciated by a little over 15 per cent.

George Menezes, chief operating officer, Godrej Appliances, said a price rise of about three per cent in the company’s home appliance-portfolio would be taken by the end of this month.

B Thiagarajan, president, Blue Star, an air-conditioning & refrigeration products maker, says his company would increase product prices by at least three per cent in the next one week. “We had factored in the rupee at 60 a dollar. It has now breached the 63-mark. We are left with no option but to increase prices,” he says.

Suresh Kumar Bandi, divisional deputy managing director, Panasonic, also said his firm’s home-appliance portfolio would see a revision in price by about three to five per cent in the next few weeks. “We were holding price lines for the last few months. But I don't think this is sustainable, with the rupee consistently falling,” he added.

Both consumer-durable and electronic-goods makers import components of television sets, washing machines and air conditioners, beside bringing completely built units of products such as digital cameras, laptops, mobile phones and microwaves into the country, since producing the latter is not viable here. A devaluation of the rupee, then, has a direct impact on these players.

Mobile phone players Micromax and Karbonn admitted a price rise by the two in the region of about five per cent was in the offing, with the current rupee rout. “We had increased prices by seven per cent in July. We are now contemplating another round of price hikes,” Vikas Jain, co-founder and business director, Micromax said. Shashin Devasare, executive director, Karbonn Mobiles, said price hikes would be affected in the next two weeks by the firm. “We had last increased prices in the middle of June. From then to now, there has been no respite on the rupee front. With margins being thin in the business, a price hike is but imminent,” he says.

Korean chaebols Samsung and LG, however, remain guarded in their response on price rises saying they are yet to take a call on the matter.

But experts said this nervousness was partly linked to the impact on demand a price hike would have with the festive season nearing. Flat panel TVs besides washing machines, microwaves, laptops and other electronic gadgets are pushed heavily during the festive period. At a time when consumers are deferring purchases, manufacturers are in no mood to dampen spirits further with a new round of price hikes. On an average, companies derive almost 25 to 30 per cent of their sales from the festive period stretching from Onam to Dussehra/Diwali.